How to navigate the confusing gov't loan forgiveness program

The government created the public service loan forgiveness program with a simple premise: Take a job to help the greater good and get some debt relief down the road.

In reality, the process of getting that promised relief has been neither simple nor forgiving.

A confusing set of rules and servicers who provided misleading or incorrect information left many people perplexed by the process and denied forgiveness.

"This is one of those well-intentioned programs that has made millions of people's heads spin," said Rohit Chopra, a Federal Trade Commissioner and student loan expert.

The program was designed to encourage people to take jobs in teaching, social work, public health or other positions that typically require higher education but pay modest wages.

To avoid financially crippling these workers, the government would forgive the balance of certain federal student loans after they worked full time for at least 10 years for a government or not-for-profit organization and, during that time, made 120 monthly qualifying payments.

The program was established in 2007, so the initial round of forgiveness was supposed to begin in fall of 2017, but very few people have made it through.

The U.S. Department of Education said that at last count, about 16,000 applications have been submitted for loan forgiveness but fewer than 1,000 people are expected to be eligible to receive that debt forgiveness in the fiscal year ending Sept. 30.

Things became so problematic that the U.S. Department of Education announced last month that Congress made $350 million available for borrowers to be reconsidered for forgiveness if they had already been denied.

So if you are trying to navigate this process, here's some help:

The basics

To begin, educate yourself on the basics requirements: you need to have the right kind of loan, the right kind of job and right kind of repayment plan (and payments). Anything less than all of these and you'll be rejected.

Check out the U.S. Department of Education's website at studentaid.gov/publicservice for more information.

The loan

You must have a federal direct loan to qualify. Other popular ways to borrow - such as a Perkins loan, Federal Family Education loan or through a private lender - do not qualify.

If you have federal loans that do not qualify, you can consolidate them into a direct consolidation loan. But beware, that starts the clock anew on the 120 monthly payments needed to garner forgiveness.

If you don't know what type of federal student loans you have, log into studentaid.ed.gov to find out.

The job

What counts as qualifying employment trips people up, said Adam Minsky, a lawyer who specializes in student loans.

You must work full time, which is based on your employer's definition of full-time or at least 30 hours per week, whichever is greater. If you have multiple jobs, you can meet the requirement if you work a combined average of 30 hours per week.

It is your employer - not your job - that determines whether you meet standards for qualifying employment. Employment with a government organization at any level - federal, state, local or tribal - counts. Serving as a full-time AmeriCorps or Peace Corps volunteer also qualifies.

It gets a little trickier when it comes to not-for-profits. If you work for a not-for-profit that is tax-exempt under Internal Revenue 501c3 rules, you are fine. Otherwise, the not-for-profit qualifies only if their primary purpose is to provide "qualifying public service," which is a list of 12 different services.

To clear up any confusion, you can file an employer certification form each year. It's not required but it will help determine if your employer is qualified, help with record keeping and head off any problems early.

The payments

You must be in an income-driven repayment plan to qualify; these plans base your monthly payment on your income.

Additionally, you must make all of your 120 payments under a qualifying plan. The payments don't have to be consecutive, but they must be in full, on time and made while you are working for a qualifying employer.

Payments made during a grace period, in deferment or forbearance generally don't count toward your total. And paying more than your monthly payment will not speed up the process.

The extension

The program got off to such a rocky start and so many borrowers were denied that Congress passed a temporary expansion of the program.

To qualify, your application must have been already denied because some or all of the payments were made under the wrong type of repayment plan. Borrowers still must have worked full time for at least 10 years with a qualifying employer and made 120 monthly payments during that time.

There is $350 million available but it's first-come, first-served. Fewer than 10,000 borrowers have applied under this expansion, according to the Department of Education.

Borrowers who believe they may qualify for the TEPSLF opportunity should email a request for reconsideration to TEPSLF@MyFedLoan.org.